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Asymmetric Information in the Market for Yield and Revenue Insurance Products

Author

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  • Makki, Shiva S.
  • Somwaru, Agapi

Abstract

This report analyzes farmers' choice of crop insurance contracts and tests for the presence of asymmetric information in the market for multiple yield and revenue insurance products. Farmers' risk characteristics, their level of income, and the cost of insurance significantly affect their choices of yield and revenue insurance products as well as their selections of alternative coverage levels. Empirical analysis indicates that, in the presence of asymmetric information, high-risk farmers are more likely to select revenue insurance contracts and higher coverage levels. The results also indicate that premium rates do not accurately reflect the likelihood of losses, implying asymmetrical information in the crop insurance market.

Suggested Citation

  • Makki, Shiva S. & Somwaru, Agapi, 2001. "Asymmetric Information in the Market for Yield and Revenue Insurance Products," Technical Bulletins 33587, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerstb:33587
    DOI: 10.22004/ag.econ.33587
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    Citations

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    Cited by:

    1. Heidelbach, Olaf, 2007. "Efficiency of selected risk management instruments: An empirical analysis of risk reduction in Kazakhstani crop production," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 40, number 92323.
    2. Cory G. Walters & C. Richard Shumway & Hayley H. Chouinard & Philip R. Wandschneider, 2008. "Information and Opportunistic Behavior in Federal Crop Insurance Programs," Working Papers 2008-9, School of Economic Sciences, Washington State University.
    3. Bokusheva, Raushan, 2004. "Crop insurance in transition: A qualitative and quantitative assessment of insurance products (Preliminary results)," IAMO Discussion Papers 14869, Institute of Agricultural Development in Transition Economies (IAMO).
    4. Bokusheva, Raushan, 2004. "Crop insurance in transition: a qualitative and quantitative assessment of insurance products," IAMO Discussion Papers 76, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    5. Lin, William W. & Somwaru, Agapi & Tuan, Francis C. & Huang, Jikun & Bai, Junfei, 2004. "Consumer Attitudes Toward Biotech Foods in China," 2004 Annual meeting, August 1-4, Denver, CO 20359, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Makki, Shiva S. & Somwaru, Agapi, 2002. "Asymmetric Information In Cotton Insurance Markets: Evidence From Texas," 2002 Annual meeting, July 28-31, Long Beach, CA 19827, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Schimmelpfennig, David E. & Norton, George W., 2000. "What Value Is Agricultural Economics Research?," 2000 Annual meeting, July 30-August 2, Tampa, FL 21773, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Shaik, Saleem & Atwood, Joseph A., 2002. "An Examination Of Different Types Of Adverse Selection In Federal Crop Insurance," 2002 Annual Meeting, July 28-31, 2002, Long Beach, California 36649, Western Agricultural Economics Association.
    9. Bruce J. Sherrick & Gary D. Schnitkey & Paul N. Ellinger & Peter J. Barry & Brian Wansink, 2003. "Farmers' Preferences for Crop Insurance Attributes," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 415-429.

    More about this item

    Keywords

    Risk and Uncertainty;

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